Before Residential Capital entered bankruptcy, billionaire Warren Buffett had wanted to buy it from Ally Financial Inc., according to three sources. They said that Buffett had assigned former hedge-fund manager Ted Weschler to approach Ally to discuss their offer. The sources also said that Berkshire Hathaway, which is owned by Buffett, would have acquired the assets for almost nothing paid upfront.
However, he will get the possible liabilities like the increasing litigation costs as well as other claims. The people said that Buffett had hoped that ResCap would be able to avoid filing for bankruptcy since Berkshire had unsecured debt in the mortgage unit.
The sources said that the Weschler proposal was rejected by Ally, the former GMAC finance unit of General Motors, because it concluded that the company would be better protected from potential liabilities by filing for bankruptcy filing and a sale. In an interview, ResCap CEO Thomas Marano said that ResCap's board voted to declare bankruptcy.
In addition, they prepared to sell to Fortress Investment Group LLC and Nationstar Mortgage Holdings Inc. for about $2.3 billion. The people said that Fortress and Nationstar won't assume the liabilities that Berkshire had intended to get.
ResCap spokeswoman Susan Fitzpatrick said that the company is “confident” that the bankruptcy court-supervised bidding process would guarantee that the ResCap estate would get the best mix of price and terms for its assets in a deal that the court would approve of.